Business and Property Review - October 2009
With Energy Performance Certificates appearing to be tailor-made for ‘Green’ taxes, Richard Weaver, principal of EnerCert Ltd., highlights some important commercial considerations.
Within the next few years it is expected that, buildings will join vehicles in being taxed on their CO2 rating.
This intention has not yet been formally published or announced, but it is the conclusion drawn by many to the introduction of energy assessments for residential and commercial property. Increasing numbers believe that the growing database of property CO2 ratings could be used to levy part of the Rates or local taxes according to a building’s energy efficiency. With government and international targets to reduce CO2 emission, the indirect pressure of market forces and reduced fuel bills would be firmly reinforced by direct pressure on the consumer’s rates bill.
Although CO2-related taxes may be several years away, the data which would be used is from current energy assessments. The validity of an EPC is ten years, and therefore the EPC for your next property transaction may be part of the basis for your (client’s) Business Rates Assessment in years to come. An accurate energy assessment and a careful response to the recommendations is therefore to be desired as a way to minimise both Rates and fuel bills.
Having mentioned validity, it worth noting than an EPC may be valid for ten years, but it will not necessarily be accurate over that same period. It is not only changes to heating, lighting and fabric of the premises that will alter the CO2 rating. Variation in the internal layout, or changes in the use of the rooms also affects energy assessment. Changes to fabric or services are usually beneficial, and it may be worth repeating the assessment and updating the database. For this reason, a recent EPC should also be requested in connection with a property transaction.
Revising or updating EPCs is more cost-effective when performed by the original energy assessor. This allows an existing computer model to be updated with the new features of the property.
As part of the energy assessment process, a building is classified according to its ‘type’. The ‘Building Type’ appears on the Statutory Recommendations Report, rather than the EPC itself, and is usually a straightforward classification such as ‘Office’, ‘Retail’, ‘Hotel’ and so forth.
However, a problem might arise where a property has a choice of potential ‘types’. For example, a unit on an industrial estate might be classified as ‘Workshop/Maintenance Depot’, or as ‘Warehouse/Storage’ or possibly ‘Industrial Process’.
The significance is that each of these types carries with it underlying assumptions about the heating, lighting and ventilation of the building it describes. The result is that the same building can have a different CO2 rating dependent on its selected ‘Type’. The selection of the ‘type’ of building is at the discretion of the assessor, and may give rise to substantial inconsistencies between otherwise equivalent buildings
Where differing classifications might be available, purchasers, tenants and their advisers are recommended to ensure that the ‘Building Type’ on EPC documentation corresponds to their intended use of the premises.
With ever increasing costs of energy, and growing social and tax burdens on CO2 emission, a property’s EPC may well become one of its more important ‘vital statistics’. The full impact may still be in the future, but the relevant assessments are being made now. With this in mind, the current commissioning, preparation and interpretation of EPCs should be afforded greater significance. The advice in last month’s energy article is worth repeating: to seek established and reputable energy assessors for such important work.
Back